Tony Fung gambles A$8.5b on Macau-like gambling resort in Cairns
HK property developer betting A$8.15 billionto attract Chinese high rollers to hotel casino resort in Queensland's former hippy town
Cairns was once a stop on the hippy trail and is now a popular destination for backpackers and diving enthusiasts. By 2019, Tony Fung Wing-cheung predicts it will be a gambling destination to rival Macau.
The Hong Kong property developer last week won early-stage government backing for his plans to build an A$8.15 billion (HK$58.6 billion) casino resort on a former sugarcane farm north of the town.
With 7,500 hotel rooms scattered around an artificial lagoon, 18-hole golf course and water park, it will nearly triple the region's hotel accommodation and be bigger than Singapore's two casino resorts put together.
"We are extremely confident that Cairns can be a global destination," said Justin Fung, Tony Fung's son and chief executive of development company Aquis Resort at the Great Barrier Reef.
"This is the closest western city to China," he said of the tropical Australian city.
Investors locked out of Macau, which has licensed just six casino operators to tap its US$45 billion gambling market, are looking to build resorts from Sri Lanka to South Korea, the Philippines to Japan, as China becomes the world's biggest source of outbound tourist revenue.
Australia's Queensland state, hit by falling coal prices that will help drive a A$324 million drop in government mining royalties by June 2017, plans to issue three casino licences to lure Asian gamblers and stimulate job growth.
Proposed developments in Cairns, Brisbane and the Gold Coast could bring the same benefits that Genting Singapore's Resorts World Sentosa and Las Vegas Sands Corp's Marina Bay Sands brought to Singapore, Queensland Premier Campbell Newman said in October last year.
The hotels helped fuel a 20 per cent jump in tourist numbers to the city state after they opened in 2010, he said.
"Everyone's seen the success of Singapore, which is just being used as a blueprint elsewhere," said Killian Murphy, an analyst at CIMB Group Holdings. "Potentially, Australia as a whole becomes a better sell into the Chinese market" if it had more resorts for tourists to choose from.
Chinese travellers overtook those from Germany in 2012 to become the world's largest source of outbound tourist revenue, with spending on overseas trips rising 26 per cent last year to US$129 billion, according to the United Nations World Tourism Organisation.
Cairns, where the existing Reef Casino Trust posted just A$24 million in revenue last year, was well placed to exploit that market, said Fung.
Another Fung family company has bought about 77 per cent of the city's only casino operator as part of a A$214 million takeover.
"We're sitting on the doorstep of the Great Barrier Reef," he said. "As the Chinese middle-class and wealthy travel, one of the first things they're going to embrace is the natural environment. Cairns has that in spades."
Floods, tornadoes, a strong Australian dollar and the rise of competing markets in Asia have stymied growth at some resorts along the Great Barrier Reef.
The Fung family had spoken to financial institutions about funding the resort and had not yet committed to any, he said.
The 343-hectare site for the Aquis resort will include two theatres, a convention centre, a sports stadium, a water park, an aquarium, shops, restaurants and 1,800 homes for staff, according to a July 2013 proposal.
With eight hotels including 7,500 rooms once complete, it will be as large as Moscow's Izmailovo Hotel Complex, the world's biggest, and surpass the 5,044-room MGM Grand in Las Vegas.
"I see more luxury projects creating a gaming destination for the Asian market," Fung said. "If you can create enough quality product, then certainly the demand is there."
Queensland might struggle to digest such a sharp increase in gambling tourism, Murphy said.
"I just think three new integrated resorts is stretching it," he said. "Trying to convince a gambler to come here can be difficult. You're talking a nine or 10-hour flight" from China.
That is not deterring Fung. The right facilities could attract visitors in numbers like those who had been lured by other casino resorts in the region, he said.
"We're on the doorstep of Macau and we've seen the incredible growth of that market. We're close to Singapore and we've seen what just two properties there are capable of doing," he said. "There is that aspect of 'If you build it, they will come'."